Monday, January 20, 2014

Do You Know About Federal Schedule UTP?

If not, join the club (your editor is a charter member).  Well, it seems that this schedule is a required filing for
some corporations with assets of at least $10 million (it had been $50 million which is why your editor was unaware) effective with 2014 tax years. UTP is shorthand for Uncertain Tax Position, and a filing requirement is triggered for a tax position taken on its federal income tax return if either:

a. The corporation or a related party has recorded a reserve with regard to that tax position for U.S. federal income tax in audited financial statements; or,

b. The corporation or a related party did not record a reserve for the tax position because the corporation expects to litigate the position.
While most of us are not involved with corporations which use audited financial statements as a basis for income tax filings, we may know someone who does and can pass the word regarding the lowered asset threshold.

Friday, January 17, 2014

How To Report Massachusetts Use Tax

Both Massachusetts and Rhode Island appear to be very interested in capturing any use tax income associated with individual taxpayers who purchase or acquire property subject to a use tax because either a sales tax was not paid or the payment (to another state) was less than the resident state sales tax.

On the Massachusetts return, Form 1, line 33 is used to meet the use tax filing obligation.  A question arose at our January state update seminar about whether there should be an entry (i.e. a zero) on line 33 when there is no use tax to report, or should the line be left blank.  William J. Lauziere, representing the MA Dept. of Revenue explained that entering a zero would start the clock on the three year statute of limitations for auditing the filing, while leaving the line blank would not.

Your editor raised a concern because an instruction sheet accompanying the January 2014 release of Drake tax software stated:

“Form 1, line 33 or Form 1 NR/PY, line 38,…is to be left blank if no use tax is due.  Do not insert O.”

Mr. Lauziere stated that the software provider was incorrect, and he provided us with the above explanation. Your editor checked his software, and a zero appears on line 33 absent any other entry.  However, does that mean that a blank will be electronically submitted, or will Drake transmit a zero?  According to Drake, a zero will be electronically submitted, so the January release instructions do not mean that anything has changed.  A zero default is a zero transmitted.

Wednesday, January 15, 2014

MA DOR Technical Information Release 14-2

Massachusetts Tax Year 2014 Exclusion Amounts for Employer-Provided Parking, Transit Pass and Commuter Highway Vehicle Benefits

I. Introduction

This Technical Information Release (“TIR”) explains the Massachusetts personal income tax tie-in to the federal personal income tax exclusion for employer-provided parking, transit pass and commuter highway vehicle benefits allowed to employees.  The TIR describes the impact for 2014 of the Massachusetts adoption of this federal exclusion based on the January 1, 2005 Code provisions that provide the annual exclusion benefit. For tax year 2014 the Massachusetts monthly exclusion amounts are $250 for employer-provided parking and $130 for combined transit pass and commuter highway vehicle transportation benefits, as further explained below.

II. Discussion

In general, the Massachusetts personal income tax follows the provisions of the Internal Revenue Code (“the Code” or “IRC”), as amended on January 1, 2005 and in effect for the taxable year, in determining Massachusetts gross income.  In particular, Massachusetts follows IRC § 132(f) as amended and in effect on January 1, 2005, which excludes from an employee’s gross income (subject to a monthly maximum) employer-provided parking, transit pass and commuter highway vehicle transportation benefits.

In previous tax years federal Acts have amended IRC §132(f), increasing the federal monthly exclusion amount for the transit pass and commuter highway vehicle transportation benefits to equal the exclusion amount for the employer-provided parking benefit. Massachusetts did not adopt the 2012 and 2013 tax year exclusion amount increases to the transit pass and commuter highway vehicle transportation benefits, given that they were enacted subsequent to January 1, 2005.

The provision in the federal Act that extended the increased federal monthly exclusion amount for the transit pass and commuter highway vehicle transportation benefits is due to expire on December 31, 2013. Therefore, for tax year 2014 the federal monthly exclusion amounts for transportation benefits are calculated based on IRC § 132(f) as it appeared in the January 1, 2005 Code.

III. Massachusetts 2014 Tax Year Inflation Adjustments for Employer-Provided Parking, Transit Pass and Commuter Highway Vehicle Benefits

Annually, the IRS issues a revenue procedure announcing the calculated inflation adjustments, if any, as to dollar amounts set forth in certain Code provisions, including the exclusion amounts for employer-provided parking and the combined transit pass and commuter highway vehicle benefits referenced in IRC § 132(f). For tax year 2014, the IRS has calculated, based on the January 1, 2005 Code, a monthly exclusion amount of $250 for employer-provided parking and $130 for combined transit pass and commuter highway vehicle transportation benefits. Massachusetts adopts these monthly exclusion amounts given that these calculations are based upon the January 1, 2005 Code.

Monday, January 13, 2014

MA DOR Technical Information Release 14-1

Individual Mandate Penalties for Tax Year 2014

Pursuant to G.L. c. 111M, § 2, the Department of Revenue is issuing this Technical Information Release to announce the penalty schedule for individuals who fail to comply in 2014 with the requirements under the Massachusetts Health Care Reform Act (the Act). See St. 2006, c. 58, as amended. The Act requires most adults 18 and over with access to affordable health insurance to obtain it. In 2014, individuals must be enrolled in health insurance policies that meet minimum creditable coverage standards defined in regulations adopted by the Commonwealth Health Insurance Connector Authority (the Health Connector). Individuals who are deemed able to afford health insurance but fail to comply are subject to penalties for each month of non-compliance in the tax year (provided that there is no penalty in the case of a lapse in coverage of 63 consecutive days or less). The penalties, which will be imposed through the individual’s personal income tax return, shall not exceed 50% of the minimum monthly insurance premium for which an individual would have qualified through the Health Connector.[1] 

These penalties apply only to adults who are deemed able to afford health insurance. On an annual basis, the Health Connector establishes separate standards that determine whether individuals, married couples and families can afford health insurance, based on their incomes and affordable health insurance premiums. Those who are not deemed able to afford health insurance pursuant to these standards will not be penalized.  Individuals also have the opportunity to file appeals with the Health Connector asserting that hardship prevented them from purchasing health insurance (and, thus, that they should not be subject to tax penalties).[2]

Saturday, January 11, 2014

RI Division of Taxation Quarterly Newsletter

The latest issue of the Rhode Island Division of Taxation's quarterly newsletter has just been posted.

Coverage includes the following:

  • What's new for filing season
  • What's new for tax year 2014
  • Tax Administrator elected FTA president
  • New chief of investigations
  • Unemployment insurance tax changes
  • "Legal Corner" feature
  • "Practitioners' Corner" feature
To read or download a copy, please use the following link:

Friday, January 10, 2014

National Taxpayer Advocate Delivers Annual Report to Congress; Focuses on Taxpayer Bill of Rights and IRS Funding

WASHINGTON — National Taxpayer Advocate Nina E. Olson today released her 2013 annual report to Congress, urging the Internal Revenue Service to adopt a comprehensive Taxpayer Bill of Rights – a step she said would increase trust in the agency and, more generally, strengthen its ability to serve taxpayers and collect tax. The Advocate also expressed deep concern that the IRS is not adequately funded to serve taxpayers, pointing out that the IRS annually receives more than 100 million telephone calls from taxpayers and that, in fiscal year 2013, the IRS could only answer 61 percent of calls from taxpayers seeking to speak with an IRS customer service representative.
“The year 2013 was a very challenging one for the IRS. Because of sequestration, the IRS’s funding was substantially cut, which translated into a reduction in taxpayer service,” Olson said in releasing the report. “Public trust in its fairness and impartiality was called into question because of reports the IRS subjected certain applicants for tax-exempt status to greater review based on political-sounding names. And because of the 16-day government shutdown, the agency could not complete preparations for the upcoming tax filing season on time, delaying the date on which taxpayers can first file returns and claim refunds.”
Olson continued: “From challenges can come opportunities, and this report presents a ‘21st century vision’ designed to meet taxpayer needs and enhance voluntary tax compliance.”

Massachusetts / Rhode Island NATP Chapter Annual State Update Seminar-January 9th 2014

Today, the MA/RI NATP Chapter held the Annual State Update Seminar in Sturbridge, MA.
Michael Romeo, Tax Divison Chief of CT Department of Revenue came to present updates and developments on CT Sales Tax, Corporate Taxes and Individual Income Tax. Of cource, CT has introduced mandates on E-File like the IRS and other states. It sounds like CT is focusing on fraud issues related to the Earned Income Tax Credit (EITC). We had some great questions from the crowd.
Brian Lynch speaking
Joining us from the MA Department of Revenue Training Division were Brian Lynch, William Lauziere & George Barresi.
Brian presented the improved WebFile for Income for individuals, different from WebFile for Business. There is also an improved abatement process online as an alternative to filing on paper. The push is definitely to get everyone filing everything electronically.
Bill Lauziere presented on Sales & Use Tax and the DOR's push for more taxpayers filing and paying Use Tax returns. As always, Bill brought his humor to his presentation and kept the energy going.
George Barresi took the floor next and covered the MA Income Tax Updates speaking about appeals, statutory collections, gambling winnings and various real life income tax cases from the MA DOR.
The Rhode Island Division of Taxation sent over our friends Matthew Lawlor & Richard Coia. Matthew is a Principal Revenue Agent on the Individual Income Tax side and Richard is a Principal Revenue Agent on the Corporation & Business Tax section.

Richard Coia & Matthew Lawlor from RI
Matthew not only spoke about the new look to the Individual tax forms and some of the inflationary changes, but also the creation of a Special Investigation Unit (SIU) and the additional time RI is devoting to Fraud Prevention.
Richard covered the business tax updates from RI. None of the forms have changed, there are no line item changes at all to any of the forms. The business section is about a year behind the individual side for updating and re-desigining their forms. They have re-coupled with the IRS on the Depreiation and Section 179. RI is also looking to increase the push towards E-File mandates.
A tasty lunch buffet of Baked Haddock, London Broil, salad, veggies, bread, chowder and desserts was served and then it was back to the action for our afternoon sessions.
Kathryn Keane from NY
We welcomed Kathryn Keane from Brooklyn to present a NY State Update and a 2 hour Federal Tax Update as well. She is the Vice President of the NY NATP Chapter and always brings her humor, her real life applications and her contagious smile.
On the NY update, Kathryn talked about the new NY Net Operating Loss (NOL) computation, sales & use taxes, NY collections and proposed regulations coming down the wire from the New York State Department of Taxation & Finance. One of the big things is the NY Tax Preparer ID# that is needed on every return.
Kathryn then went on to offer us a 2 hour CE approved Federal update to kick off our tax season. She covered topics such as E-Filing, the Loving Case, EITC Due Dilligence, updated Schedule D, DOMA and of course, ACA - The Affordable Care Act.
If you attended the seminar, we thank you for joing us. If you missed it, we hope to catch you next year. Here are a few photos from the day.

George Barresi form MA DOR answering questions 
View from the crowd

A time to catch up with old friends

You have got to be kidding me...

This Fruit is awesome!!

Nina Marcinowski giving education tips to new Education Chair Tracy Bird

Monday, January 6, 2014

AFRs and 7520 Rates for January 2014

AFRs - When a taxpayer makes a loan or sells something on installment, a minimum interest rate normally has to be charged.  The minimum rate depends on the month of the loan or sale.  The IRS releases the Applicable Federal Rates (AFRs) each month.  They are broken down into short-term (3 years or less), mid-term (more than 3 years, but not more than 9 years), and long-term (more than 9 years).  They are further broken down into Annual, Semi-Annual, Quarterly, or Monthly compounding periods.

The January 2014 applicable federal rates (AFRs) are (annual, semi-annual, quarterly, monthly):

IRC 7520 Rates – These rates are normally used when determining life estate & remainder interests when property has been gifted with the giver retaining a life estate.  The rate for January is 2.2%.

Revenue Ruling 2014-1

Recent revenue rulings containing AFRs can be found by searching for “afr” on

Friday, January 3, 2014

REMINDER - Massachusetts / Rhode Island NATP Chapter Annual State Update Seminar - January 9th 2014

Join the Massachusetts / Rhode Island NATP Chapter on Thursday, January 9th, 2014 for our Annual State Update Seminar. This all day event will be held at the Sturbridge Host in Sturbridge MA. Registration details are below, and will be handled online by National this year. A link to the registration website is listed below. Please take a look at the details on our speakers and topics provided in this great update opportunity including continental breakfast, snacks, lunch, vendors and great networking opportunities PLUS even 2 CE Credit Hours.


IRS Quarterly Interest Rates Remain Same for 1st Quarter 2014

IRS has announced the interest rates for the 1st quarter of 2014.  The rates remain the same across the board as:

-    3% for most overpayments (2% for corporation overpayments)
-    3% for underpayments
-    5% for large corporate underpayments
-    0.5% for corporate overpayments exceeding $10,000

These rates have not changed since October 1, 2011, and now continue through March 31, 2014 (through April 15, 2014 for purposes of Form 2210).

Revenue Ruling 2013-25